Blues post gain for quarter Profits up 28%, to $11.3 million

officials project record year

November 17, 1992|By Patricia Meisol | Patricia Meisol,Staff Writer

Blue Cross and Blue Shield of Maryland reported yesterday an $11.3 million profit for the quarter ended Sept. 30, representing a 28 percent improvement over the same period last year. Company officials continued to project a record year despite enrollment losses in health-care subsidiaries and unanticipated expenses.

The state's largest health insurer, under intense review by its board of directors since a U.S. Senate subcommittee investigation revealed a history of poor management and financial troubles, also said its revenues were up 13 percent, to $379.8 million, for the third quarter.

Earnings at Blue Cross' managed-care subsidiaries, including its health maintenance organizations, were down slightly for the quarter. But they were up substantially for the year because of lower expenses and efficiencies from a reorganization 15 months ago. Company officials expressed confidence that the fragile turnaround that began in late 1991 would continue.

Blue Cross President Carl J. Sardegna attributed overall gains to continual attention to underwriting and a focus on trying to anticipate and manage price-related swings in the industry -- "making sure we write sound business," he called it -- and reducing expenses by nearly 1 percent, or about $15 million.

Mr. Sardegna said publicity surrounding the Senate hearings at the end of September, including questions about the nature of the Blues' reserve fund, "have had an impact on potential new sales" in the six weeks of the current quarter. But overall, Mr. Sardegna said, "we are holding our own. We are losing some accounts and gaining some accounts."

In discussing its third-quarter earnings yesterday, the company set the stage for what could be a precipitous drop in net worth come year's end.

For the first time in a public statement on its finances, Blue Cross acknowledged that $88.1 million of the $102.5 million it has listed in reserves for emergencies is there by special permission from state regulators rather than because it conforms to standard accounting rules.

In anticipation of the new rules, the Blues this quarter reduced the value of two of its HMOs by $10 million to reflect a more conservative industry value. The company had claimed the higher value for its HMOs for the first time last year.

The Blues posted a $38.3 million profit for the nine months ended Sept. 30, up 78 percent over the same period last year. Revenues for the same period rose 8 percent. That's against a predicted total 1992 profit of between $40 million and $42 million.

For the three months ended Sept. 30, HMO profits declined slightly to $2.8 million from $3 million last year, about 6 percent. Revenues were down 17.9 percent. For the nine months, HMO earnings rose 62 percent to $5.2 million over the same period last year, with revenues down to $287 million, or 13 percent. The plans, which raised prices in the past year, will drop premiums or reduce increases, Blues official said. In addition, HMOs are focusing on new products and customer satisfaction.

To streamline its operations and cut losses, the Blues yesterday said it will fold 11 inactive subsidiary companies by Dec. 1 and

close down its arbitrage firm in a few months.

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